A Task for Hercules: Why is portfolio transformation so difficult? (Part 2)

In part 1 of this article, I outlined the three portfolio transformation imperatives that make it seem like the labors of Hercules. In part 2, let’s take a look at each imperative and see how to set ourselves up for a win.

Imperative 1: Evolve your organization’s portfolio management and product development approaches

Portfolio transformations require ground-up changes in executive decision-making and the organization’s product development mindset. What solutions should be prioritized? How can you better orient your team to customer needs so they can architect the best market-savvy portfolio? How will you help engineers optimize the customer experience – from feature design and development to on-boarding to day-to-day operations, support, and maintenance until the customer migrates to the next-gen ecosystem?

1. To improve existing products or build new ecosystems, you will need a compelling vision to compete for funding over other perhaps standalone revenue-generating offers. The C-suite must prioritize that long-term organizational vision over near-term gains. Take the page from Apple. Their iconic user experience is a purpose-built, long-term vision spanning the UI and products to diagnostic apps, carefully instrumented to deliver a unique and sticky experience.
2. For new products, you may have to shed some features which sales promised to pilot customers so you can build the Minimum Viable Product (MVP) instead.
3. A customer migration to the new model is typically not a one-shot event. Build sufficient time and effort into your business case. Come up with a clear approach for new and legacy product pricing and bundling, managing existing entitlements, and transitioning the customer base. Compile a list of potential early adopters and form a team of expert sellers and a customer success team to engage them. Give customers a heads-up while being sensitive to their concerns.
4. You may not always have a readily-quantifiable business case to instrument ecosystems for serviceability, manageability, and maintainability as you may for a standalone product. This means taking calculated risks with such tradeoffs. For example, Amazon’s early investment in their Web Services (AWS) automation and a configurability portal made AWS a raving success. Kindle became popular across a strategic book-loving customer segment because Amazon enabled seamless book download via Whispernet back when tablets didn’t come with 3G connections.
5. When moving from a standalone product to an aaS business model, be sure to budget adequate development time, resources, and skill sets. You will need domain experts and talented staff to research, analyze, document, and measure how well the product meets desired outcomes. Bring the user, sales, services, and customer success teams along on your development journey.
6. Finally, transforming the portfolio into cohesive solutions means finding integration points across all product interactions. That’s what it takes to create a common, consistent thread to create a differentiated stickiness where the whole is greater than the sum of the parts. The Salesforce ecosystem, the vertical integration delivered by Apple, and Microsoft’s connectivity across Office, Sharepoint, and Skype solutions are all examples of tightly-integrated systems.

Imperative 2: Reconfigure your operations backbone to align with your business model

When a transition involves changing out the guts of your business model and major sales, ERP and financial systems, how do you go about it? Here are some pointers:

1. Consider using a business model canvas to evaluate the functional entities impacted by each component on the canvas. Get early buy-in on your “big idea” from go-to-market and IT executive stakeholders.
2. Create a list of existing product contracts and master service agreements that will need retooling. Look specifically for discount structures embedded in those contracts, compensation models, and margin targets.
3. A “clean cutover” in portfolio transformation is incredibly rare. Dual support legacy and new offers is more the norm. Be realistic about the transition timeframe. Consider special sales incentives and one-time investments to speed up the migration (ex., migrating customers’ legacy databases to reduce or eliminate future support costs.)
4. The transformation will impact front-end sellers and the support organization. Prioritize the training component and engage all impacted functions including your channel partners!
5. Involve customers and channel partners in the transformation and help them through potential rainy-day scenarios during the cutover. While most talked about, this is one that frequently gets lost in the shuffle.

Imperative 3: Transforming the culture that may be eating your strategy for lunch!

Like any other large-scale organizational transition, your portfolio transformation journey will not be successful without change management! For portfolio transformation to succeed, you should plan to:

1. Reconfigure your organization’s governance, processes, and metrics to enable your portfolio transformation objectives.
2. Charter a cross-functional team of evangelists and change agents to hand-hold employees through the transition. Task this team with celebrating milestones so employees can rally around their wins big and small.

And with those nuggets, here are some final thoughts.

Don’t be daunted…

Other companies have made it through and so can yours! Here is some parting advice for you:

• Set realistic goals and ensure the entire company is aligned on those goals. Make sure all functional goals align with your overall transformation objectives (ex., a cost reduction in engineering and support does not align with new offer creation. Incentivized renewal targets or KPI for existing offers will not help move customers to the new portfolio.)
• Fail often, learn fast, and pivot. Right out of a Silicon Valley bible, you might think! I have a different take on this: be a multiplier. If you’re not learning exponentially from your failures, step back, re-evaluate your transformation goals, and correct course.
• Remember transformation is a journey. While you’re shaking things up for good purpose, there is no three-year roadmap chiseled on a stone tablet that you can hand to your executive sponsor. Find simple, creative ways to qualify and quantify the opportunity. Let customers know, too, that you are undertaking this journey to improve their experience.

Being a Transformation agent can be a lonely job. But remember energy givers have the grit of Hercules to succeed at transformations large and small. Be one of them. Carpe diem!